Wednesday, May 6, 2015

Why Rent When You Can Litigate?

B & C Management Vermont, Inc. v. John, 2015 VT 61

By Amy Davis

Back in 1987, a lease was established on a commercial property in Brattleboro for $26,500 annually. The lease also set out how rent would increase in subsequent years. The part of the lease that matters here put forth increasing rent based on cost-of-living increases. Because of that provision, the landlord calculated the annual rent increase each year and sent a notice to the tenant. The increase was added to the old rent to arrive at the new rent.

In 2007, the tenants assumed the lease and the rent increases went uncontested from 2008-2012. In 2013, the landlords sent notice to the tenants that the new rent was $54,060. The tenants objected to both the amount and the way rent had been calculated. I don’t really blame themmath is pretty hard. Landlord and tenant couldn’t work it out, so tenant sought a declaration that its interpretation of the lease language was correct, and also wanted damages for overpaid rent.

Both parties moved for summary judgment. Tenant based on the plain language of the lease, and the 4% cap on the difference between the Consumer Price Index and blah blah blah (I told you math is hard, so I’m not about to explain it now). Tenant said they should pay $45,819.83. Landlords had some jiggery pokery math of their own, and calculated the rent as $57,836. They also argued that if the lease was ambiguous, then the court should use the method of calculation the parties had used in the years prior.

The trial court said that the lease language was “highly ambiguous” and determined that the parties’ apparent intent was: (1) to account for inflation, and (2) to limit annual rent increases. The court did not agree with either parties’ interpretation of how rent should be calculated because each was inconsistent with one of those purposes. So the court looked at the parties’ performance, and even though during parts of the tenancy the calculation had departed from some language in the lease, the calculation best reflected the parties’ intention. Also, this result was most equitable. So, the court granted the landlords’ summary judgment motion.

Tenants appealed arguing that the court erred in looking to extrinsic evidence to change the ambiguities, and that the award of summary judgment to landlords is inequitable.

Reviewing de novo, the SCOV agrees with the trial court. The SCOV declines to excise the rent-increase paragraph in question from the rest of the lease. The contract must be viewed in its entirety. Agreeing that there is ambiguity in the rent-increase provision, the SCOV holds that the trial court properly looked to extrinsic evidencethe parties’ performance. Based on that information, the Court concluded that both sides had acquiesced for many years in the rent calculation.

The Court concludes by saying this isn’t a windfall for the landlords. It’s a reasonable result given the various methodologies and whatnot. It’s a pretty vanilla case all around.

Justices Dooley and Robinson concur separately for largely the same reasons. They both note that while landlords' position makes more sense, but because the landlords didn't pony up with a cross appeal, they're stuck affirming the trial court. 

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